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The (Rail)road to Structural Change: Transportation Costs, Integration, and Production Specialization

  • Walker, Sarah
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    The current study explores the role of economic integration in catalyzing structural change. Specifically, it addresses the question of how reductions in transportation costs affect patterns of production specialization over time. Drawing upon the New Economic Geography literature (Krugman, 1991; Krugman & Venables, 1995) and exploiting a natural experiment in the 19th century Austro-Hungarian Empire, I develop a structural model to empirically measure the effect of reduced transportation costs – through the introduction of railroads – on the concentration of manufactures production in a regional economy over time (i.e., 1841-1917). The structural estimations are supplemented by a reduced form strategy that attempts to address the inherent simultaneity bias that the structural estimates are incapable of solving.

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    File URL: http://purl.umn.edu/124614
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    Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 124614.

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    Date of creation: Jun 2012
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    Handle: RePEc:ags:aaea12:124614
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    1. Abhijit Banerjee & Esther Duflo & Nancy Qian, 2012. "On the Road: Access to Transportation Infrastructure and Economic Growth in China," NBER Working Papers 17897, National Bureau of Economic Research, Inc.
    2. Redding, Stephen J. & Vera-Martin, Mercedes, 2003. "Factor Endowments and Production in European Regions," CEPR Discussion Papers 3755, C.E.P.R. Discussion Papers.
    3. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
    4. Leamer, Edward E. & Maul, Hugo & Rodriguez, Sergio & Schott, Peter K., 1999. "Does natural resource abundance increase Latin American income inequality?," Journal of Development Economics, Elsevier, vol. 59(1), pages 3-42, June.
    5. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-48, December.
    6. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," International Trade 0103003, EconWPA.
    7. Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2008. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," CER-ETH Economics working paper series 08/89, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    8. Peter K. Schott, 2001. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," NBER Working Papers 8244, National Bureau of Economic Research, Inc.
    9. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    10. Joeri Gorter & Albert van der Horst & S. Brakman & H.F.L. Garretsen & M. Schram, 2005. "New economic geography, empirics, and regional policy," CPB Special Publication 56, CPB Netherlands Bureau for Economic Policy Analysis.
    11. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "New economic geography in Germany : testing the Helpman-Hanson model," HWWA Discussion Papers 172, Hamburg Institute of International Economics (HWWA).
    12. Devarajan, Shantayanan & Lewis, Jeffrey D & Robinson, Sherman, 1993. "External Shocks, Purchasing Power Parity, and the Equilibrium Real Exchange Rate," World Bank Economic Review, World Bank Group, vol. 7(1), pages 45-63, January.
    13. Keller, Wolfgang & Shiue, Carol Hua, 2008. "Tariffs, Trains, and Trade: The Role of Institutions versus Technology in the Expansion of Markets," CEPR Discussion Papers 6759, C.E.P.R. Discussion Papers.
    14. Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
    15. Sohrab Abizadeh & Manish Pandey, 2009. "Trade Openness, Structural Change and Total Factor Productivity," International Economic Journal, Taylor & Francis Journals, vol. 23(4), pages 545-559.
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